Business Risks

INCENTIAPAY FACES A NUMBER OF BUSINESS RISKS THAT MAY IMPACT THE COMPANY’S ABILITY TO ACHIEVE ITS STRATEGIC OBJECTIVES AND CREATE SHAREHOLDER VALUE.

THE BUSINESS RISKS WERE OUTLINED IN DETAIL IN THE CAPITAL RAISING DOCUMENTS LODGED WITH THE ASX IN FEBRUARY 2018. THE BOARD CONSIDERS THE FOLLOWING TO BE THE KEY RISKS CURRENTLY FACING THE BUSINESS.

RISK

REGULATORY

REPUTATION

COMPETITION

NATURE OF RISK

IncentiaPay is subject to substantial regulatory and legal oversight. The agencies with regulatory oversight of IncentiaPay and its subsidiaries include, among others, ASX and ASIC. Failure to comply with legal and regulatory requirements may have a material adverse effect on IncentiaPay and its reputation among customers and regulators, and in the market.

IncentiaPay has compliance frameworks, policies and procedures in place to manage the risk of non-compliance, and is prepared to play an active role in consulting with regulators on changes that could impact the business.

Reputation risk may arise through the actions of IncentiaPay or its employees and adversely affect perceptions of IncentiaPay held by the public, customers, shareholders or regulators. These issues include appropriately dealing with product outages or issues, potential conflicts of interests, legal and regulatory requirements, ethical issues, privacy laws, information security policies and sales and trading practices. Damage to IncentiaPay’s reputation may have an adverse impact on IncentiaPay’s financial performance, capacity to source funding and liquidity, cost of sourcing funding and liquidity, and by constraining business opportunities.

IncentiaPay actively manages the above risks by regularly monitoring its market reputation amongst customers and shareholders, as well as keeping an open dialogue with regulators and financiers.

New competitors are emerging in the loyalty and incentives markets, within which IncentiaPay operates. The loyalty space is particularly competitive, with many well-funded international competitors. An inability to adapt to technological advancement, including further digitisation of products, could negatively impact the ability to attract customers and have a material adverse effect on the business of IncentiaPay.

To mitigate this, IncentiaPay continues to invest in its merchant content, including the signing of exclusive content where applicable. The Company’s ongoing investment in its digital technology assets will also assist to lessen this risk.

RISK

PERSONNEL

THIRD PARTY FAILURE

FUNDING

INTELLECTUAL PROPERTY RISK

NATURE OF RISK

IncentiaPay’s success depends, in part, upon the continued performance, efforts, abilities and expertise of its key management personnel, as well as other management and technical personnel, including those employed on a contractual basis. The loss of the services of these personnel without replacement could have an adverse impact on the successful operation, management and marketing of IncentiaPay’s product/service offerings and platforms. Further, a substantial increase in labour costs for employees or contractors may have an adverse impact on the financial performance and/or financial position of IncentiaPay.

The Remuneration Committee, a sub-committee of the Board, reviews the incentive structures of key personnel and senior management to ensure their remuneration is in line with the market, with a proportion deferred as a longterm/retention incentive. In addition, management regularly undertakes succession planning analysis of key lead roles with the view to understand suitable internal talent and their readiness to assume these roles.

IncentiaPay is reliant on a number of third party contractors. These third parties provide essential services, on an outsourced basis, including software and/or product development activities. Accordingly, IncentiaPay is reliant on contractors properly performing their contractual obligations and performance failures may have an adverse effect on IncentiaPay. IncentiaPay is also an extensive user of third party provided IT hardware and software platforms, systems and infrastructure. IncentiaPay is reliant on these suppliers properly performing their contractual obligations, and performance failures or unreasonable price increases may have a material adverse impact on the Company. A failure by any of these suppliers to provide those services or a failure of their systems may adversely affect IncentiaPay’s ability to provide services to its customers.

To minimise these risks, IncentiaPay actively engages with its key third party providers on a regular basis and remains abreast of potential risks within these providers through regular interaction at the senior management level.

There is no certainty that IncentiaPay will remain well funded, especially if existing financial resources are invested in growth or the development of IncentiaPay’s technology platforms and that investment does not generate a timely return.

IncentiaPay continually manages its cash position and regularly monitors its investments to balance the risk, outlay and timings of the returns. In addition, the Company continues to keep unused debt facilities available for any short-term funding requirements.

Whilst every effort has been made to secure the technology supporting IncentiaPay’s various platforms, IncentiaPay does not intend to apply to register patents for all the intellectual property associated with the Entertainment and Frequent Values platforms. Other parties may claim infringement of patents or alternatively other parties may develop and patent other very similar, potentially substitutable products, processes or technologies.

IncentiaPay see the unique value of its intellectual property, in the content of its Entertainment and Frequent Values platforms, as a mitigant to this risk.